Women on top: Does having more females in the boardroom make a difference?

Many corporate boards are boasting their efforts to recruit women, from current lamentable levels.

But it looks like the prospect of new Europe-wide rules could be the decisive kick up the backside UK PLC needs to achieve a measure of equality, in the absence of concerted pressure from the investment community.

There is a head of steam gathering amongst UK companies, especially the largest ones on the FTSE 100, to get more women at the top.

Around 30 per cent of FTSE members appointed this year are female.

The Government-sponsored Davies review published in February pressed for 25 per cent of PLC board members to be female by 2015, with a September 2011 deadline for companies to announce their "aspirational goals", and help focus corporate mindsets.

The Confederation of British Industry (CBI) has put its weight behind Davies, and a group of large company chairman and other worthies known as the 30% Club is campaigning energetically for a series of measures to promote the prospects of women at senior and board level.

However, the fact is the fairer sex still only make up 13,9 per cent of FTSE 100 boards, and just 8.7 per cent of the FTSE 250 top tier; 14 blue chip boards have no ladies whatsoever.

According to Martin Gilbert, chief executive of Aberdeen Asset Management, if investment managers, the owners of the UK's companies, were to force the issue, we'd have 30 per cent representation within a year.

But some fund managers are luke-warm. One heavy-hitter told us: "The Davis report argument report is flawed. Sex is irrelevant. It's what he or she brings to the table, it's what underneath the surface that counts. The starting point has to be a person's skill sets and experiences."

As things stand, there are two sticks ready to force UK blue chips into greater action. The one wielded by a body called the Financial Reporting Council , which defines UK corporate governance standards.

The FRC have a consultation out at the moment on moves towards enforcing diversity on boards.

This, says Helena Kennedy, chief executive of Newton, should sharpen the act both of companies and their investors.

The other, bigger and more painful stick is the threat of enforced quotas by the European Union, which earlier this year signalled its intention to act in the absence of country-level action.

Norway already has a 40 per cent requirement on corporate boards, Spain and France are working towards those figures, and many other countries are putting some sort of regulatory arrangement in place.

There is a strong business case for gradually growing the number of women on boards, with well-qualified individuals developed from within companies and from non-traditional sources like the public and third sectors.

Slapping an arbitrary percentage on will, they fear, smack of tokenism, and fail fundamentally to broaden the pool of female talent, or inject businesses with the genuine boost a more considered female ascent would bring.

Marc Jobling, assistant director for corporate governance at the ABI , says: "Many, particularly at a European level, see this as a social justice issue. Investors see it in terms of board effectiveness."

Some, however, now believe quotas are inevitable. Karina Litvak, head of governance and sustainable investment at F&C Asset Management, says patience is wearing thin, and "pale male"-dominated firms show a striking lack of imagination in the process of identifying talent, and recruit in their own image.

Research is stacking up, to underpin the business case for having more women on top. The Davies review quoted studies showing how companies with more women on their boards outperform rivals, with a 42 per cent higher return on sales, 66 per cent higher return on invested capital and 53 per cent greater return on equity.

Many in the investment and corporate community seem unconvinced about these figures, but feel the case for more women is strong on other counts.

Sir Roger Carr, chairman of Centrica and president of the CBI, says: "Boards are intellectually and socially enriched by the presence of women and consistently more effective through balanced judgement and opinion in decision-making."

One of the weaknesses that helped floor business in the recent financial collapse was the homogeneity on boards.

The old boy's network filled corporates with placemen: yes-men who weren't awkward enough and failed to ask tricky questions.

Emma Howard Boyd, head of sustainable investment and governance at Jupiter, says by bringing women to the table, boards are likely to move away from group-think, and there will be more challenge on strategy and governance issues.

Another strong reason for having more women at the helm is talent. With girls now storming ahead at all levels of education, and 50 per cent of women at company entry level, Susan Vinnicombe, professor at Cranfield School of Management, says we are leaking huge numbers of top ability individuals, and our companies are the poorer.

Then there's the markets argument. With 70-80 per cent of consumer decisions made by females, who own half the nation's personal wealth (rising to 65 per cent 2025), firms can ill afford not to reflect their markets on boards.

Vinnicombe says more women at higher levels serve as role models for younger ones starting out, and there is evidence that female top execs adopt a superior, more strategic, transformational leadership style.

There are problems, however, finding suitably qualified women within companies, and the more diversity-led blue chips have development and mentoring programmes to help on their female talent.

Ruby McGregor-Smith, Chief executive of MITIE is creating a flexible environment in her FTSE250 company, where even most senior women can take family time out. Corporates are pressurizing headhunters to be more creative about lists of candidates for non-executive posts.

However, it remains the case that in the absence of structures that enable women to re-enter the workforce after prolonged periods of childcare, their ascent will be limited.

Helena Morrissey at Newton makes no bones about the fact that her husband stopped work to look after her kids. Would we were all so blessed!